UPDATE 1-Banco do Brasil beats profit estimates and lifts 2021 outlook

(Adds loan book growth, delinquency and new outlook)

By Carolina Mandl

SAO PAULO, Nov 8 (Reuters) - Brazilian state-controlled lender Banco do Brasil SA on Monday beat analysts' estimates for third quarter profit and said it is likely to post a full-year net income higher than it had previously forecast.

The bank sees its recurring net income, which excludes one-off items, at up to 21 billion reais ($3.81 billion), or 1 billion reais higher than before, as its loan book is poised to expand faster.

Recurring net income came in at 5.139 billion reais, up 47.6% from the same period a year earlier, and above an analysts estimate compiled by Refinitiv of 4.496 billion reais. Its return on equity came in at 14.3%.

Its net interest income, a measure of earnings on loans minus deposit costs, rose 11.9% year-over-year to 15.683 billion reais, driven by lending and trading gains.

Banco do Brasil's loan book grew 6.2% in the quarter, driven by small companies, individuals and agribusiness. The bank said its lending portfolio is set to grow between 14% and 16% this year, boosting net interest income. Previously, the bank forecast an expansion of 12% at most.

CEO Fausto Ribeiro said in a statement the bank will pursue growth in riskier credit lines with higher margins from now on.

Its 90-day loan default ratio stood roughly flattish at 1.82%.

Lower loan-loss provisions also helped Banco do Brasil post a higher-than-expected profit, as they declined 28.8% from a year earlier, to 3.924 billion reais. Still, they rose 36.7% on a sequential basis.

Shares in Banco do Brasil are down around 20% this year, the worse performance among the country's biggest listed lenders, mainly on concerns about political interference.

($1 = 5.5103 reais) (Reporting by Carolina Mandl; Editing by Christian Plumb)